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tax deduction

Taxes

What Is The Difference Between A Tax Credit And A Tax Deduction?

As we draw nearer to doing our taxes for 2010, it is important for us to understand the difference between a tax deduction and a tax credit.

A tax deduction reduces your taxable income, and the actual amount of taxes you save depends upon your personal tax rate.   If you are in a high tax bracket, a tax deduction can provide you with substantial tax savings, but if you are in a low tax bracket the savings will be lower.  If you have no taxable income, a tax deduction does not benefit you at all.

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